The question of whether central banks should target stock prices so as to prevent bubbles and crashes from occurring has been hotly debated. This paper analyses this question using a behavioural macroeconomic model. This model generates bubbles and crashes. It analyses how 'leaning against the...

This paper, which draws on a longer, more analytical Working Document by the same author (No. 304/September 2008), explores the question of whether central banks should target stock prices so as to prevent bubbles and crashes from occurring. It analyses how 'leaning against the wind' strategies,...

We present a simple behavioral model with chartists and fundamentalists and analyze their trading behavior in both a floating and a target zone exchange rate regime. When applied to the floating regime, the model replicates the well-known stylized facts, such as excess volatility, fat tails,...

We provide evidence indicating that countries with well-developed social security systems do not necessarily face a trade-off between social spending and competitiveness. On average, countries that spend a lot on social needs score well in the competitiveness league. We investigate the...